"It's great to be with you today. Earlier this morning I visited BAE Systems' Warton factory. I was hugely impressed, as anyone would be, by Warton's world class technology and the evident pride of everyone working there.

BAE Systems is a great British company. It has sites across the UK. It generates tens of thousands of jobs - making world beating products, from Eurofighter Typhoon to the new Type 45 destroyers. BAE Systems is part of a long and proud tradition. Britain's defence industry served our country at its moment of greatest need; designing and manufacturing the aircraft flown by the Few that kept us free.

Today's defence industry is one of Britain's largest exporters. It has built a unique position in the United States thanks to the quality of its technology and the deep ties which bind our two countries together. British companies are the only foreign companies with a leading role in the Joint Strike Fighter. That is a tribute to British skills, British enterprise and British hard work.

A Conservative Government will maintain and extend the unique position our defence companies hold in the United States. But let's not forget that the Ministry of Defence is likely to remain BAE Systems' largest customer. We will establish a business-like working relationship to the benefit of both sides.

A Clear-eyed Defence Strategy

A Conservative defence policy will be guided by our overwhelming obligation to protect Britain's national interest and that includes our obligation to discharge to the full our global responsibilities.

Britain's armed forces may be small in number by comparison to America but we are the largest military power in the European Union and a leading member of NATO, the most successful military alliance in world history.

My strategy is clear. Britain needs a government that:

-- has a clear and realistic vision of our global role;

-- provides our Armed Forces with the resources to carry out the job we ask them to do; and

-- respects the culture of our Armed Forces - a culture which makes them the envy of the world.

Mr Blair - Taking the Wrong Path

I make two criticisms of Mr Blair's stewardship of Britain's defences. First, Mr Blair has elevated European defence integration at the expense of our long-standing commitment to the Atlantic Alliance.

And second, our Armed Forces have been asked to do more without being given the resources to do the job.

Britain's network of formal alliances and shared interests - in particular our relationship with the United States - is being put at risk, despite our close co-operation with the US over Iraq, by Mr Blair's obsession with the European Union.

I strongly support greater co-operation between European countries on defence. But it should take place within the framework of NATO. I have grave reservations about Europe's plans to undertake a new defence initiative which involves duplicating the planning and command structures of NATO.

NATO should remain the cornerstone of our defence. And the European Union should not seek to create a defence structure as an alternative to NATO or as a counterweight to the United States.

The European Constitution requires member states to "actively and unreservedly support the Union's common foreign and security policy in a spirit of loyalty and mutual solidarity".

It will mean that once the European Union has decided its line, a British government could not change it without getting the unanimous support of every other member of the EU. Our ability to defend our interests in the world and support our friends would be seriously compromised.

If Mr Blair gets his way with the European Constitution Britain will lose one of the central attributes of being an independent nation state. One example of how the desire to please our European partners works against Britain's national interests can be seen in the current proposal to lift the EU embargo on selling arms to China.

Trade with an increasingly prosperous China is, of course, very important and welcome. It explains why there are some within the EU, notably France, who want to lift the arms embargo against China. The attitude of Mr Blair's Government at best has been ambivalent. And let us remember: this is an arms embargo - not a trade embargo.

So this involves much more than trade and economics. It also raises serious fundamental issues about human rights. I want to praise China for the enormous contribution that it has made in the last decade to reducing world poverty. China has achieved in the last decade one of the biggest reduction in poverty the world has ever seen.

However, the Foreign Office recently voiced "serious concerns" about China's record on human rights - the extensive use of the death penalty, torture, harassment of political dissidents, and severe restrictions on the freedoms of speech, association and religion.

It also impinges directly on our national interest, not least jobs in the defence industry. For understandable strategic reasons, America does not want to see US military technology being made available, however indirectly, to the People's Republic of China. If Europe lifts the embargo there is a real danger that the US will simply cease to provide any EU country with that technology. And in Britain's case this would be devastating to the effectiveness of our military and defence capabilities.

For all these reasons I oppose any moves by the European Union to lift the embargo on arms exports to China. We need the Government to make a clear, unambiguous statement on where it stands.

Now to my second criticism of Mr Blair's eight years at the helm. At a time of growing threats, global instability and new dangers Mr Blair has decided to cut our Armed Forces. This cannot be right. We cannot afford to gamble with our national security.

Anybody who has given serious thought to the threats we face today could not conclude that we currently have enough soldiers in the infantry. But Labour have let Armed Forces manning levels drop 3,000 below establishment. On top of that, the Government has announced a further cut in our infantry levels of four battalions.

What a stab in the back for the men and women Mr Blair sent into the line of fire. Regiments, which are the focus of loyalty, the nurseries of military excellence and potent symbols of pride, are to have their identities casually erased.

A soldier's loyalty is not just to Queen and Country but also to those he or she fights alongside, a group given a sense of comradeship by our regimental system. The Government's insensitivity to those ties is shocking.

The Royal Navy, already smaller than at any time in modern history, is to lose three Type 42 destroyers and three Type 23 frigates. After Mr Blair's cuts it would be left with only 25 frigates and destroyers. For the first time in 200 years Britain would have a smaller navy than France.

And the Royal Air Force will lose 7,500 personnel under Labour's plans.

The strain placed on military manpower by this Government strikes at the heart of the flexible force structure we need to cope with contemporary threats. And just think about this for one moment. In January over 50 redundancy notice letters were sent to serving officers in Iraq.

To make matters worse some of our servicemen and women were sent to Iraq without the right equipment - the right boots, the right combat kit or the right body armour. Nor did they have the equipment to cope with the threat of chemical and biological weapons. That is because Labour cannot even manage the Ministry of Defence properly.

Britain has a shortfall between the number of helicopters we need and the number that we actually have - we're nearly 40 per cent short. We have a quarter of a billion pounds worth of Chinook helicopters sitting on the ground that we cannot even use.

Three years ago Ministers were given the chance to sell these failed Chinooks back to the US and replace them with a version that works. And guess what? They didn't.

As if that wasn't bad enough we've recently had an official report showing that the finances of the MOD are so badly managed that equipment is being withdrawn before it can be replaced. I'll give you a very simple example.

When the last of the Sea Harriers is taken out of service the Royal Navy will have no air cover. It won't be able to defend itself against attack until enemy aircraft are so close they can actually fire their missiles. And this won't get any better until the first Type 45 destroyer is delivered sometime in 2009.

The planes to go on the new aircraft carrier - the Joint Strike Fighter - aren't now due to be delivered until two years after the first carrier enters service.

So under Labour we'll have an aircraft carrier without any aircraft and a fleet which can't defend itself from air attack.

Things are so bad that it's probably only a question of time before the crossed swords of the Army's emblem are replaced by Tony Blair's crossed fingers.

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